My Name is Paul H Cosentino. I started this Blog in 2011 because of what I believe to be wrongdoings in town government. This Blog is to keep the citizens of Templeton informed. It is also for the citizens of Templeton to post their comments and concerns.

One week ago, Illinois passed its three year-overdue budget
in hopes of avoiding a downgrade to junk status, however in an
unexpected twist, Moody's said that it may still downgrade the near-insolvent state,
regardless of the so-called budget "deal." In fact, a downgrade of
Illinois may come at any moment, making it the first U.S. state whose
bond ratings tip into junk, although as of yesterday,
credit rating agencies said they were still reviewing the state's newly
enacted budget and tax package. The most likely outcome is,
unfortunately for Illinois, adverse: "I think Moody's has been pretty
clear that they view the state's political dysfunction combined with
continued unaddressed long-term liabilities, and unfavorable baseline
revenue performance as casting some degree of skepticism on the state's
ability to manage out of the very fragile financial situation they are
in," said John Humphrey, co-head of credit research at Gurtin Municipal
Bond Management.

And yet, while Illinois squirms in the agony of
the unknown, another municipality that as recently as a month ago was
rumored to be looking at a bankruptcy filing, the state capital of
Connecticut, Hartford, no longer has to dread the unknown: following S&P's downgrade to junk on Tuesday, Moody's just shifted Hartford's GOs to B2 from Ba2, with a negative outlook.

Excerpted Moody's note:

Moody's
Investors Service has downgraded the City of Hartford, CT's general
obligation debt rating to B2 from Ba2. The outlook is negative.

The rating was placed under review for possible downgrade on May 30, 2017. The par amount of debt affected totals approximately $550 million.

The downgrade reflects the increased likelihood that the city will pursue debt restructurings to address its fiscal challenges.
Last week, the city hired a law firm to advise it on debt
restructurings. City management has made public statements indicating
they will need to have discussions with bondholders about restructuring
its debt regardless of the outcome of the state's biennial budget as
debt service costs escalate sharply leading to budget deficits over the
next five years.

The rating also reflects the city's challenging
liquidity outlook in the current fiscal year and weak prospects for
achievement of sustainably balanced financial operations. The
city currently projects a fiscal 2018 deficit of $50 million and is
seeking incremental funding from the state to close that gap. The state
has not yet adopted a budget specifying aid for the city for the fiscal
year beginning July 1. Even if the state's biennial budget allocates
sufficient funds to address the current and following years deficits and
create a fiscal oversight structure, the budget is still unlikely to
provide a pathway to structural balance over the longer term. City
deficits, partially attributable to escalating debt service costs, are
projected to grow to $83 million by 2023, making the city's weak
financial position vulnerable to further deterioration.

Rating Outlook

The negative outlook reflects the possibility that the city will restructure its debt in a way that will impair bondholders. The
outlook also incorporates uncertainty over state funding in the current
fiscal year and beyond and the associated impact on reserves, liquidity
and the ability to achieve sustainably balanced operations.

In short: the capital of America's richest state (on a per
capita basis), will - according to both S&P and Moody's - be one of
the first to default in the coming months.

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Must be time for Hartford to build new schools, public safety buildings and update its aging DPW fleet!

3 comments:

This is really starting to show that we have a fundamental flaw in our method of governing systems. This is the direction we as a nation are heading.

Look at our Town. What is our debt ratio now. What will it be in 5 years? Now you can multiply that right on down the line. Because town debt, is state debt, is federal debt and is paid by the same people.